Robert Half International Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; comparisons are with Q1 2021 unless stated otherwise. Robert Half provides contract and permanent-placement talent solutions and business consulting through Protiviti.
Financial performance
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Service revenue | $1,814.8 million | $1,398.4 million | +29.8% |
| Gross margin | $771.8 million; 42.5% of revenue | $561.7 million; 40.2% | +37.4% |
| Income before taxes | $227.4 million | $150.1 million | +51.5% |
| Net income | $168.2 million | $110.6 million | +52.1% |
| Diluted EPS | $1.52 | $0.98 | +55.1% |
| Operating cash flow | $69.2 million | $68.1 million | +1.6% |
Revenue growth by segment: contract talent solutions +30.0% to $1,155.7 million; permanent placement talent solutions +67.2% to $186.8 million; Protiviti +18.9% to $472.3 million. U.S. revenue rose 31.7% to $1.42 billion; international revenue rose 23.4% to $400 million.
Reported SG&A was $514.2 million, or 28.3% of revenue, versus $423.1 million, or 30.3%. Company-reported adjusted SG&A was 29.8% of revenue versus 29.5%. Contract talent gross margin improved to 40.0% from 38.8%, which management attributed to wider pay-bill spreads and higher conversion revenue. Protiviti adjusted gross margin declined to 25.3% from 26.9%, reflecting lower utilization and increased headcount.
Liquidity, capital and debt
Cash and cash equivalents were $550.3 million at March 31, down from $619.0 million at year-end 2021. Current assets were $2.27 billion and current liabilities $1.29 billion. Operating cash flow was nearly flat year over year; working-capital changes used $171 million, primarily including higher receivables and lower accrued payroll and deferred-compensation obligations.
Investing activities used $27.1 million and financing activities used $109.6 million. Financing included $62.1 million of share repurchases and $47.5 million of dividends paid. The declared quarterly dividend was $0.43 per share; a subsequent dividend at that rate was announced for payment June 15, 2022. The company had no borrowings on its $100 million revolving credit facility, which matures in May 2024, and was in compliance with its covenants. Operating lease liabilities totaled $262.7 million. Management expects internally generated cash to support operating needs and obligations.
Outlook, commentary and risks
- Management described global demand and labor markets as robust, citing talent shortages, elevated job openings and turnover, and growing acceptance of remote and hybrid work. Headcount increased across all segments from year-end levels.
- No revenue or earnings guidance was provided. The company expected 2022 capital expenditures of $95 million to $105 million, including $75 million to $85 million for software and technology infrastructure.
- Management noted limited visibility because engagements are generally short-term and demand depends on economic and labor-market conditions. Risks include economic uncertainty, candidate availability, competition, client demand, regulatory and employment matters, litigation, cybersecurity, and foreign-exchange movements.
- Foreign operations generated 22% of revenue. Currency movements reduced Q1 reported revenue by $18.5 million; management estimated the net-income impact at approximately $1 million lower year over year.
- Two California putative class-action employment cases remained unresolved. The company said loss outcomes and ranges were not reasonably estimable, recorded no related amounts, and intended to defend the claims. It reported no material developments in previously disclosed legal proceedings.
Important facts for investors to verify
- Whether strong staffing demand, especially permanent placement growth, continues amid economic uncertainty and constrained candidate supply.
- Whether Protiviti utilization and adjusted gross margin recover as headcount expands.
- The trend in receivables, working-capital cash use, and cash generation relative to repurchases, dividends, and planned capital spending.
- Developments in the California employment litigation and any changes to the company’s assessment of potential loss.
- The distinction between reported and adjusted expense and margin measures: deferred-compensation trust investment gains and losses are substantially offset by related employee-obligation changes and do not affect pretax income.